August 23, 2013, 8:39PM

08/23/2013

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SACRAMENTO — A judge Friday gave new life to a pair of high-profile redevelopment projects in Sonoma County, tentatively ruling that state finance officials abused their authority by essentially demanding the county give up millions of dollars allocated for the work.

At issue are the long-planned Highway 12 street and sidewalk upgrades north of Sonoma and the proposed residential and commercial complex on an abandoned shopping center in Santa Rosa's Roseland neighborhood.

Both projects could have been thwarted, and may yet be, depending on the outcome of future legal proceedings. But county representatives on Friday expressed relief at winning a tentative victory in the crucial first round.

"It looks like we got over the first hurdle in court today," Kathleen Kane, executive director of the Sonoma County Community Development Commission, said outside the courtroom.

The county sued the state of California in January after finance officials in Sacramento determined that funding for the two projects was subject to redistribution to other taxing agencies under Gov. Jerry Brown's 2012 statewide dissolution of redevelopment agencies.

County officials claim the contracts set up by the county's former redevelopment agency to carry out the projects are valid and should shield the funds from redistribution.

Officials with the state Department of Finance, however, argue that the contracts between county agencies were not an "enforceable obligation" with a third party and therefore aren't valid under state law.

Sacramento Superior Court Judge Eugene Balonon wrote in his tentative ruling that was the focus of Friday's hearing that the state agency "abused its discretion" when it determined that payments for the two projects were not enforceable obligations.

The ruling does not address whether funds for the project will come from cash on hand or future tax receipts. The county filed a separate lawsuit seeking authority to use approximately $6.8 million it has currently for the projects — $5.2 million for Highway 12, and $1.57 million for Roseland.

Kane said if the county prevails in the second lawsuit, an additional $2.2 million in bond proceeds that have been frozen amid the legal uncertainty would be available for the Highway 12 work.

She said the county also would be eligible to receive an additional $7.3 million in future tax receipts, with $5 million dedicated to the Roseland project and $2.1 million for Highway 12.

Balonon concluded Friday's short hearing without saying when he would render a final decision on the county's original lawsuit, which the state is likely to appeal.

In roughly 120 lawsuits, cities and counties across the state have sought to hold onto tax dollars meant for breathing life into stagnant downtowns and blighted areas. Sonoma County's case mirrors many of those fights and could be decided by a higher court.

Kane said construction on both projects could slow to a crawl if the county is prevented from spending the $6.8 million it has on hand and instead must rely on money raised through future tax receipts.

Such an outcome could mean that the local oversight board of county, city and school officials that was formed following the February 2012 dissolution of redevelopment agencies would have to continue its work for years or decades to come — an irony given Gov. Brown's goal of quickly shutting redevelopment agencies down.

The county Board of Supervisors already has earmarked a share the former redevelopment funds that were redistributed to it by the state for the Highway 12 work, set to get underway next spring, and to start environmental cleanup of the former Roseland shopping center.

The money is now part of the county general fund and could have been designated for a wide variety of purposes. It totals $11.5 million this fiscal year.

The General Fund would be in line for reimbursement for more than half of that total if the county lawsuit is successful. If not, the future of the two projects — especially Roseland — could remain in limbo, forced to compete for funding with the many other services and programs supported by the general fund.

SACRAMENTO — A judge Friday gave new life to a pair of high-profile redevelopment projects in Sonoma County, tentatively ruling that state finance officials abused their authority by essentially demanding the county give up millions of dollars allocated for the work.

At issue are the long-planned Highway 12 street and sidewalk upgrades north of Sonoma and the proposed residential and commercial complex on an abandoned shopping center in Santa Rosa's Roseland neighborhood.

Both projects could have been thwarted, and may yet be, depending on the outcome of future legal proceedings. But county representatives on Friday expressed relief at winning a tentative victory in the crucial first round.

"It looks like we got over the first hurdle in court today," Kathleen Kane, executive director of the Sonoma County Community Development Commission, said outside the courtroom.

The county sued the state of California in January after finance officials in Sacramento determined that funding for the two projects was subject to redistribution to other taxing agencies under Gov. Jerry Brown's 2012 statewide dissolution of redevelopment agencies.

County officials claim the contracts set up by the county's former redevelopment agency to carry out the projects are valid and should shield the funds from redistribution.

Officials with the state Department of Finance, however, argue that the contracts between county agencies were not an "enforceable obligation" with a third party and therefore aren't valid under state law.

Sacramento Superior Court Judge Eugene Balonon wrote in his tentative ruling that was the focus of Friday's hearing that the state agency "abused its discretion" when it determined that payments for the two projects were not enforceable obligations.

The ruling does not address whether funds for the project will come from cash on hand or future tax receipts. The county filed a separate lawsuit seeking authority to use approximately $6.8 million it has currently for the projects — $5.2 million for Highway 12, and $1.57 million for Roseland.

The county in May refused the state's demand to return the money.

Kane said if the county prevails in the second lawsuit, an additional $2.2 million in bond proceeds that have been frozen amid the legal uncertainty would be available for the Highway 12 work.

She said the county also would be eligible to receive an additional $7.3 million in future tax receipts, with $5 million dedicated to the Roseland project and $2.1 million for Highway 12.

Balonon concluded Friday's short hearing without saying when he would render a final decision on the county's original lawsuit, which the state is likely to appeal.

In roughly 120 lawsuits, cities and counties across the state have sought to hold onto tax dollars meant for breathing life into stagnant downtowns and blighted areas. Sonoma County's case mirrors many of those fights and could be decided by a higher court.

Kane said construction on both projects could slow to a crawl if the county is prevented from spending the $6.8 million it has on hand and instead must rely on money raised through future tax receipts.

Such an outcome could mean that the local oversight board of county, city and school officials that was formed following the February 2012 dissolution of redevelopment agencies would have to continue its work for years or decades to come — an irony given Gov. Brown's goal of quickly shutting redevelopment agencies down.

The county Board of Supervisors already has earmarked a share the former redevelopment funds that were redistributed to it by the state for the Highway 12 work, set to get underway next spring, and to start environmental cleanup of the former Roseland shopping center.

The money is now part of the county general fund and could have been designated for a wide variety of purposes. It totals $11.5 million this fiscal year.

The General Fund would be in line for reimbursement for more than half of that total if the county lawsuit is successful. If not, the future of the two projects — especially Roseland — could remain in limbo, forced to compete for funding with the many other services and programs supported by the general fund.